Accounting Principles I Final Exam || Questions & Solutions (100% Correct)

Accounting Principles I Final Exam || Questions & Solutions (100% Correct) Accounting Principles I Final Exam || Questions & Solutions (100% Correct) A local retail shop has been operating as a sole proprietorship. The business is growing and now the owner wants to incorporate. Which of the following is not a reason for this owner to incorporate? A)The ease in transferring shares of the corporation's stock B)Desire to limit the owner's personal liability C)Ability to raise capital for expansion D)The prestige of operating as a corporation - ANSWER - D Notes to the financial statements A) need not be read in detail if an unqualified opinion accompanies the financial statements. B) are generally brief and few in number. C) are optional. D) help clarify information presented in the financial statements. - ANSWER - D The retained earnings statement shows all of the following except A) the time period following the one shown for the income statement. B) beginning retained earnings on the first line of the statement. C) the causes of changes in retained earnings during the period. D) the amounts of changes in retained earnings during the period. - ANSWER - A Claims of owners are called A) liabilities. C) income payable. B) dividends. D) stockholders' equity. - ANSWER - D An income statement A) presents the revenues and expenses for a specific period of time. B) reports the changes in assets, liabilities, and stockholders' equity over a period of time. C) reports the assets, liabilities, and stockholders' equity at a specific date. D) summarizes the changes in retained earnings for a specific period of time. - ANSWER - A Which of the following set of characteristics describes a corporation? A) Shared control, tax advantages, increased skills and resources B) Easier to transfer ownership and raise funds, no personal liability C) Simple to set up and maintains control with founder D) Harder to raise funds and gives owner control - ANSWER - B Which of the following would not be considered an internal user of accounting data for a company? A) The controller of the company B) The president of the company C) Salesperson of the company D) Creditor of the company - ANSWER - D In a study session, a classmate makes this statement "Dividends are listed as expenses on theincome statement." What is your best response to this statement? A) You are right. Revenues and expenses are shown on the income statement. Dividends are a cost of generating revenues and that makes them an expense. Why else would a corporation pay dividends? B) Dividends are deducted from retained earnings on the balance sheet. C) I've been struggling with that concept and I feel that dividends should be shown on the balance sheet as assets. D) Dividends represent a portion of corporate profits paid to the shareholders. They belong on the retained earnings statement. - ANSWER - D Which of the following statements is true? A) Publicly traded U.S. companies must provide an annual report to their shareholders when operating conditions change significantly. B) An unqualified independent auditor's report must be included in the annual report. C) Notes to the financial statements do not need to be included in the annual report because that information is only for internal users. D) None of these answer choices are correct. - ANSWER - D